Explanatory Materials for
Financial Results
Fiscal year ended March 31, 2022
IWATSU ELECTRIC CO., LTD. | May 26, 2022

Table of Contents

1

Business Overview

2

Results for the Fiscal Year Ended March 31, 2022

3

Forecast for the Fiscal Year Ending March 31, 2023

4

Supplementary Materials© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

2

1

Business Overview

Business Overview
The Company, founded in 1938, and the Group are mainly engaged as a manufacturer of business communication
systems, printing systems and test and measurement equipment, as well as property leasing.
Revenue composition ratio (FY 2021)
Property leasing

Business
communication
systems

2.0%
Test andmeasurement
equipment

12.7%

77.3%

¥23.18billionPrinting
systems

8.0%
Test and measurement equipment
For more than 60 years, sinceoscilloscopes were first
introduced in Japan, we havepursued higher performance andmultifunctionality in test andmeasurement equipment used
Semiconductor Curve Tracer
not only in industry but many
CS-8000 Series
other research and development
and educational fields.

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Business communication systems
The Company was founded as atelephone manufacturer. The
Company has built up a historyof manufacturing and sellingbusiness phones and providing
contact center systems, and has
begun offering cloud services as Example of an office withwell as IoT products and web
the “Frespec” business
communication services inphone system
recent years.

Printing systems
Starting with the manufactureand sale of platemakers, which
are machines used to create
printing plates, the Company
has captured the wave ofdigitalization in the printing
market in recent years and has
responded to new needs byintroducing digital label printing
machines to the market.

Property leasing

Group companies

The Company leases andmanages property holdings,
strategically and efficiently
linking its property leasing tobusiness performance andimproving the Group’s
profitability.










Iwatsu Manufacturing Co., Ltd.
Iwatsu Network Solution Co., Ltd.
Dentsu Service Co., Ltd.
Iwatsu System & Software Co., Ltd.
Iwatsu Business Services Co., Ltd.
Tohtsu Industry Co., Ltd.
groxi.Inc
Iwatsu (Malaysia) Sdn. Bhd.

Prime Terrace
KAMIYACHO (Exterior)
4

2

Results for the
Fiscal Year Ended
March 31, 2022

Fiscal Year Ended March 31, 2022: Review of External Environment
The external environment and the major impacts on the Company’s business, on which the results for the fiscal
year ended March 31, 2022, are based, are as follows.

External
Environment

 The global economy is recovering from the COVID-19 pandemic as the compatibility of health and economic measures progresses, but thedomestic economy’s recovery is slowing slightly due to a sharp increase in the number of new cases of the omicron strain of the COVID-19 virusthat appeared in 2022.
 The number of staff attending the office, which declined due to the pandemic, has not fully recovered, and a hybrid work style combining office
and remote work has partially taken hold. Offices are shifting from a centralized model to a decentralized model, and the reduction of officespace is accelerating.
 Shortages and price increases in manufacturing components is continuing due to global semiconductor shortages, etc.

Business communication
systems

Printing systems

Major Impacts on
Business

Test and measurement
equipment

Property leasing© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Revenue increased with the signing of contracts for projects that had been suspended in the previous fiscal year due
to the impact of the pandemic. On the other hand, in terms of production, its continuity was maintained but profitability
declined.
Struggled due to the trend of stagnation in the printing market as a whole due to the impact of the pandemic.
of power electronics-related products increased due to the rebound from the previous fiscal year’s restraints on
capital investment and the impact of increased semiconductor demand brought about by the global semiconductor
shortage.
The pandemic’s impact was minimal and income-producing properties generally operated smoothly.

6

Financial Highlights for the Fiscal Year Ended March 31, 2022
While there were signs of economic recovery, stagnation in production activities due to supply shortages ofmanufacturing components, in particular semiconductors, and increases in raw material prices continued, andtheir impact on earnings became apparent, but the Company achieved increases in both revenue and profit.
(¥100 million)

Revenue

Results for the
fiscal year
ended March
31, 2021

Results for the
fiscal year
ended March
31, 2022

217.1

231.8

Operating profit

(9.7)

5.0

Ordinary profit

(9.0)

5.9

Profit attributableto owners ofparent
ROE

52.3

6.0

23.6%

2.4%

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Change fromprevious year

Revenue

Increased by focusing on partsprocurement and production activities
despite supply shortages ofmanufacturing parts, particularly
semiconductor parts, and increases in
raw material prices.

OperatingprofitIncreased in line with growth in revenue,
decreased loss from inventory valuation
and reduced fixed costs, despite
increases in raw material prices andtransportation costs.

ProfitDecreased due to the income taxescurrent of ¥160 million and income taxesdeferred of ¥2.0 billion in connection withrecording of a gain on sale of land of¥8.33 billion as extraordinary income in
the previous fiscal year.

+14.8[+6.8%]

+14.7
[-]

+14.9
[-]

(46.4)[(88.6%)](21.2%)

7

Analysis of Changes in Consolidated Operating Profit for the Fiscal
Year Ended March 31, 2022(¥100 million)

Main causes of change
4.5
5.9

(0.9)

5.0

 Increase in revenue: +¥610 million
Operating profit increased in line with growth inrevenue Decrease in loss from inventory valuation:+¥590 million
Cost of sales improved due to a decrease inloss from inventory valuation, which wascaused by arrangements made in advance toprepare for the difficulty in obtaining raw
materials that occurred in the previous fiscal
year and changeovers to mainstay products.

(0.9)

6.1

 Increase in raw material prices: - ¥90 million
Cost of sales deteriorated due to shortages insupply of manufactured parts
 Increase in transport costs: - ¥90 million
Cost of sales deteriorated due to higher
transport costs resulting from higher fuel prices(9.7)
FY ended
March 2021

Increase inrevenue

Decrease in loss
Increase in raw
from inventorymaterial prices
valuation© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Increase intransport costs

Decrease in
SG&A
expenses

FY ended
March 2022

 Decrease in selling, general andadministrative expenses: +¥450 million
Decrease in personnel costs and expenses
due to reduction in headcount and changes inworkforce composition8Performance Highlights by Segment for the Fiscal Year Ended March 31, 2022(¥100 million)

Business
communication
systems
Printing
systems
Test andmeasurement
equipment
Property
leasing

Adjustment

Results for the fiscal
year ended
March 31, 2021

Results for the fiscal
year ended
March 31, 2022

Revenue

170.1

179.2

+9.1 [

Segment
profit/loss

8.8

16.0

+7.2 [ +81.9% ]Revenue

17.5

18.5

+1.0 [+5.9% ]

Segment
profit/loss

(2.7)

0.2

+2.9 [-]

Revenue

25.5

29.5

+4.0 [ +15.7% ]Segment
profit/loss

(1.1)

2.2

+3.3 [

Revenue

4.0

4.6+0.6 [ +16.3% ]Segment
profit/loss

1.2

1.0

(0.1) [ +11.4% ]Revenue---

Segment
profit/loss(15.8)(14.3)+1.4 [-]

Revenue

217.1

231.8

+14.8 [

+6.8% ]

Operating profit

(9.7)

5.0

+14.7 [-]

Total

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Change from previous
year (%)+5.3% ]-]

9

Segment Overview: Business Communication Systems● Revenue● Segment Profit/Loss(¥100 million)

200

Main causes of change(¥100 million)

170.
1

179.2

20

16.0

150

100

10

8.8

 Segment profit/loss: +¥720 million
Increase in revenue: +270
Decrease in loss from inventory
valuation: +410
Increase in raw material prices: -90
Increase in import costs: -80
Decrease in SG&A expenses: +210

50

0

0

FY ended
March 2021

FY ended
March 2022

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

FY ended
March 2021

 Revenue
Revenue was ¥17.92 billion, an
increase of ¥910 million (5.3%) fromthe previous fiscal year due toincreases in the main product ofbusiness phones and contract
production at the production subsidiary

FY ended
March 2022

10

Segment Overview: Printing Systems● Revenue● Segment Profit/Loss(¥100 million)

Main causes of change(¥100 million)

20

17.5

18.5

1

0.2
15

0

10

-1

5

-2

0

-3

FY ended
March 2021

FY ended
March 2022

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

 Segment profit/loss: +¥290 million
Increase in revenue: +120
Decrease in loss from inventory
valuation: +110
Increase in raw material prices: -0
Increase in import costs: Decrease in SG&A expenses: +60(2.7)
FY ended
March 2021

 Revenue
Revenue was ¥1.85 billion, an
increase of ¥100 million (5.9%) fromthe previous fiscal year, mainly due toan increase in revenue ofconsumables despite a decrease inrevenue of printing-related equipment

FY ended
March 2022

11

Segment Overview: Test and Measurement Equipment● Revenue● Segment Profit/Loss

29.5(¥100 million)

30

Main causes of change(¥100 million)

3

2.2

25.5
2
20
1

0
10
-1

(1.1)
0
FY ended
March 2021

FY ended
March 2022

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

-2

FY ended
March 2021

FY ended
March 2022

 Revenue
Revenue was ¥2.95 billion, an
increase of ¥400 million (15.7%) fromthe previous fiscal year, mainly due toan increase in revenue of powerelectronics-related products andelectronic components
 Segment profit/loss: +¥330 million
Increase in revenue: +230
Decrease in loss from inventory
valuation: +70
Increase in raw material prices: -0
Increase in import costs: -10
Decrease in SG&A expenses: +40

12

Segment Overview: Property Leasing● Revenue● Segment Profit/Loss(¥100 million)

4

Main causes of change(¥100 million)

4.6

5

2

4.0

1.2

3

1.0

1

 Revenue
Revenue was ¥460 million, an
increase of ¥60 million (16.3%) fromthe previous fiscal year, mainly due toan increase in revenue from incomeproducing properties
 Segment profit/loss: -¥10 million
One-time expenses such as leasing
costs: -10

2

1

0

0

FY ended
March 2021

FY ended
March 2022

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

FY ended
March 2021

FY ended
March 202213

Consolidated Balance Sheet for the Fiscal Year Ended March 31, 2022(¥100 million)

As of March 31, 2021

As of March 31, 2022

Change fromprevious year

Main causes of change Current assets: +¥940 million

Current assets

163.0

172.3

+9.4

Non-current
assets

198.2

192.1

(6.1)

361.1

364.4

+3.3

Current
liabilities

42.5

42.8

+0.2

Non-current
liabilities

68.9

68.1

(0.8)

Total assets

Total liabilities
Net assets
Total liabilities andnet assets© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

111.4
249.7

110.8
253.6

(0.6)
+3.9

Cash and deposits: +390
Electronically recorded monetary claimsoperating: +200
Merchandise and finished goods: +270
Raw materials and supplies: +650
Accounts receivable-trade: -260
Other: -290, etc.

 Non-current assets: -¥610 million
Property, plant and equipment: -200
Intangible assets: -300
Investments and other assets: -110

 Current liabilities: +¥20 million
Accounts payable-other: +220
Notes and accounts payable-trade: -150, etc.

 Non-current liabilities: -¥80 million
Retirement benefit liability: -70, etc.

 Net assets: +¥390 million

361.1

364.4

+3.3

Retained earnings: +200
Foreign currency translation adjustment: +130

14

Consolidated Statement of Cash Flows for the Fiscal Year Ended March 31, 2022
Cash and cash equivalents at the end of the fiscal year ended March 31, 2022 were ¥5.76 billion, an increase of¥390 million from the previous fiscal year(¥100 million)

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

Change fromprevious year

Major breakdown items
 Cash flows from operating activities

Cash flows fromoperating activities

(6.5)

13.2

+19.7

Cash flows frominvesting activities(19.1)

(5.5)

+13.6

Profit before income taxes: ¥650 million
Depreciation: ¥1,080 million
Decrease in trade receivables: ¥110 million
Increase in inventories: -¥850 million
Decrease in trade payables: -¥170 million
Other, net: +¥590 million

 Cash flows from investing activities
Free cash flows

Cash flows fromfinancing activities(25.6)

7.7

+33.3

(0.1)

(4.1)

(3.9)

Purchase of property, plant and equipment:-¥530 million
Purchase of intangible assets: -¥200 million
Proceeds from sale of investment securities:+¥170 million

 Cash flows from financing activities
Dividends paid: -¥390 million

Cash and cash
equivalents© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

53.6

57.6

+3.9

15

3

Forecast for the
Fiscal Year Ending
March 31, 2023

Fiscal Year Ending March 31, 2023: Forecast of External Environment
The external environment and the major impacts on the Company’s business, on which the forecast for the wholeof the fiscal year ending March 31, 2023, are based on, are as follows.
External
Environment

 With the global progress in living with the COVID-19 virus through vaccination and other measures, autonomous recovery is expected to takefull effect, led by consumption and investment. Once the pandemic peaks out, the Japanese economy is also expected to recover, with
employment and income conditions to improve and capital investment to recover as economic activity normalizes.
 It is expected that supply shortages of semiconductors and other manufacturing components will not be resolved and restrictions on production
and procurement will continue.
 Prolonged Russian aggression in Ukraine may lead to higher raw material prices and the risk of economic decline.

Business communication
systems

Printing systems

Major Impacts on
Business

Test and measurement
equipment

Property leasing© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

While demand for cloud services is expected to increase, there is also expected to be a certain level of demand in
the Company’s main area of business of on-premises services. In addition, the risk of profit deterioration in partsprocurement is expected to continue.
The difficult environment is expected to continue due to the uncertain conditions for the recovery of the printing
market.
While the normalization of economic activities will ease the restraints on domestic and overseas businessdevelopment, the risk of delivery delays in parts procurement is expected to persist.

It is expected that careful leasing will be required to minimize the impact of office decentralization and downsizing.

17

Consolidated Whole-Year Forecast for the Fiscal Year Ending March 31, 2023
While revenue is expected to increase, operating loss, ordinary loss and loss are expected to be recorded on the
profit side due to the implementation of drastic structural reforms based on the medium-term management plan.
(¥100 million)

Results for the
fiscal year
ended March 31,
2022

Forecast for the
fiscal year
ending March
31, 2023

231.8

237.0

Revenue

Operating profit

5.0

(4.0)

Ordinary profit

5.9

(3.5)

Profit attributableto owners ofparent

6.0

(3.5)

2.4%

(1.5%)

ROE© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Change fromprevious year(%)

Revenue Revenue is expected to increase
due to the expected end of thepandemic and normalization of
economic activities+5.2[+2.2%]

(9.0)
[-]

(9.4)
[-]

(9.5)
[-]

(3.9%)

 Deteriorating cost rate is expected
due to increasing raw material prices
caused by the prolonging of thesituation in Ukraine
Operating profit
 An operating loss, ordinary loss andOrdinary profit
loss are expected to be recorded
Profitdue to one-time expenses aimed
towards the future as we promote
structural reforms based on the new
medium-term management plan
“REBORN”
18

Dividend Forecast for the Fiscal Year Ending March 31, 2023
The Company plans to pay a dividend of ¥25 per share for the fiscal year ended March 31, 2022. For the fiscal
year ending March 31, 2023, a year-end dividend will not be paid due to the forecast of the planned net loss
based on the new medium-term management plan. In the future, the Group will make a concerted effort to further
enhance corporate value and strengthen shareholder returns.
(Yen)

50

Year-end dividend

Dividend payout ratio

40.0

40

41.7%

36.8%
30

25.0

24.1%
20

10

10.0

10.0
7.6%
0.0%

0.0

0.0

0

FY ended
March 2018
© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

FY ended
March 2019

FY ended
March 2020

FY ended
March 2021

FY ended
March 2022

0.0%

FY endingMarch 2023
(forecast)19

Capital Investment, R&D Expenses and Depreciation Forecast for the Fiscal YearEnding March 31, 2023
● Capital Investment● R&D Expenses(¥100 million)105● Depreciation(¥100 million)

20

Tangible

102.1(¥100 million)

16.1

Intangible, others

100

15

18.8

15.9

10.8

15

7.8

10

15
95

7.3

10

6.88

10
5

94.3

5.72

0.43

1.06

5
5

6.5

4.7

0

0
FY ended
March 2021

11.3

FY ended
March 2022

FY endingMarch 2023
(forecast)

0
FY ended
March 2021

FY ended
March 2022

FY endingMarch 2023
(forecast)Fiscal year ended March 31, 2022

Fiscal year ended March 31, 2022

 Tangible capital investment decreased ¥8.96 billion due Decreased ¥270 million due to development costs ofto the acquisition of ¥8.80 billion of new incomeproducing properties in the previous fiscal year Intangible and other capital investment decreased ¥670
million because the software for the successors to themainstay products was recorded in the previous fiscal
year

Fiscal year ending March 31, 2023
 Tangible, intangible and others forecast to increase¥120 million compared to the previous fiscal year
© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

the successors to the mainstay products in theprevious year

Fiscal year ending March 31, 2023
 Forecast to decrease ¥20 million compared to theprevious fiscal year

FY ended
March 2021

FY ended
March 2022

FY endingMarch 2023
(forecast)Fiscal year ended March 31, 2022
 Increased ¥350 million due to investment indevelopment of the successor models to the mainstay
products and depreciation of new income-producing
properties

Fiscal year ending March 31, 2023
 Forecast to increase ¥50 million compared to theprevious fiscal year20

4Supplementary
Materials

Company Outline● Company Outline
Company NameIWATSU ELECTRIC CO., LTD.

Established

August 14, 1938

Headquarters
Address

1-7-41 Kugayama, Suginami-ku, Tokyo 168-8501, Japan

Tel./Fax

Tel: 03-5370-5111 Fax: 03-5370-5115 (main)

Details ofBusiness Development, manufacture and sale of equipment and service
provision in the business communication systems, printing
systems and test and measurement equipment fields
 Property leasing, etc.
Company Brochure (PDF)

Representative

Toru Nishido, President

Capital¥6 billion (as of March 31, 2022)

Revenue

Consolidated ¥23.1 billion (FY 2021)

Number of
Employees

Non-consolidated 433; Consolidated 1,258 (as of March 31, 2022)

Major Financial
Institutions

MUFG Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation

Construction
License● Domestic Locations
Hokkaido BranchWestern-Japan Branch
Chushikoku Branch
Kyushu Branch

Licensed by Minister of Land, Infrastructure, Transport andTourism (Han-3) No. 26305
Telecommunications work and electrical work

© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Tohoku Branch
Kita-Kanto
Region Office

Chiba Region Office

Headquarters
Central-Japan Branch

22

History
August 1938

October 1943IWATSU ELECTRIC CO., LTD. established in
Yoyogi-Uehara-cho, Shibuya-ku, Tokyo

New office building completed in Kugayama,
Suginami-ku, Tokyo
Headquarters moved from Yoyogi-Uehara-cho

December 1945 Branch office established in Nagoya City (nowCentral-Japan Branch)

December 1952 Branch office established in Osaka City (nowApril 1991

Iwatsu (Malaysia) Sdn. Bhd. (a consolidated subsidiary)established in Malaysia

July 2009

Acquired shares of Lee．Netsolutions Co., Ltd. (nowgroxi.Inc, a consolidated subsidiary)

October 2009 Acquired shares of Dentsu Service Co., Ltd. (aconsolidated subsidiary)

July 2016

Ltd., Iwatsu Test Instruments Corporation and Media
Comfort Corporation

Western-Japan Branch)

June 1954

Branch office established in Fukuoka City (nowKyushu Branch)

March 1957

Listed on the First Section of the Tokyo Stock
Exchange

April 1970

Fukushima Iwatsu Co., Ltd. (now Iwatsu Manufacturing Co.,
Ltd., a consolidated subsidiary) established in Fukushima
Prefecture as a production base for button phones© 2022 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

 Integration of three subsidiaries: Iwatsu Sales Co., Merged Fukushima Iwatsu Co., Ltd. with Denshi Kako
Co., Ltd. and changed its name to Iwatsu
Manufacturing Co., Ltd.

October 2019 Lee．Netsolutions Co., Ltd. changed its name to groxi.Inc
July 2021

Iwatsu Network Solution Co., Ltd. (a consolidated
subsidiary) was established by spinning off part of IWATSU
ELECTRIC CO., LTD.’s business communication systems
business in the Tokyo metropolitan area and Iwatsu
Business Services Co., Ltd.’s business communication
systems sales and installation business
23

Caution Regarding Forward-Looking Information
Statements in this document regarding future plans, forecasts, strategies and other future information of the Company and the Group are basedon certain assumptions that the Company determines to be reasonable based on information available at the time this document was prepared,
and actual results may differ significantly from these assumptions. These statements regarding forward-looking information involve a variety ofrisks and uncertainties, the principal ones are listed below, but this list is not exhaustive.
 Trends at major customers
 Bias towards second-half performance Intensifying market competition withcompetitors Deterioration in business performanceof business partners, etc.
 Litigation and other legal proceedings Natural disasters, etc.
 information leaks

The statements contained herein do not constitute a public offering of securities.

 Spread of infectious disease Procurement risks (e.g., supply shortages due
to rapid changes in international conditions andincreasing procurement prices) Economic trends